Venezuela Sells $200 Mln in Auction Without Revealing FX Rate

The auction awarded dollars to 383 companies, the ministry
said in a statement posted on its website. Only companies
registered with the Cadivi currency board could participate in
today’s auction.

Acting President Nicolas Maduro’s government introduced the
new foreign exchange mechanism ahead of an April 14 presidential
election in a bid to halt the bolivar’s decline on the black
market and reduce shortages of goods in local stores. The
bolivar has depreciated 19 percent to about 23 bolivars per
dollar on the black market since Feb. 8, when the currency was
devalued 32 percent on the Cadivi system.

“The only reason not to disclose the FX rate is because
they don’t want to concede a de facto second devaluation in the
middle of an election campaign,” Benjamin Ramsey, an analyst at
JPMorgan Chase & Co. in New York, said in an e-mailed statement.
“I think it’s safe to assume it was above the official 6.3,
otherwise they would have disclosed.”

The Finance Ministry hasn’t said how often the dollar
auctions will be held or given the date of the next sale. The
new system will prioritize the supply of dollars for importing
medicine, health-care equipment, food and industrial equipment,
Finance Minister Jorge Giordani said March 19.

The government may adjust the system to allow individuals
to take part, Maduro said yesterday.

Dollar Shortage, Distortions

The shortage of dollars since the late President Hugo Chavez won re-election in October has stoked inflation and
exacerbated shortages of staple goods as imports fell.

Annual inflation accelerated to 22.8 percent in February,
the fastest pace in 10 months. The central bank’s scarcity
index, which measures the amount of goods that are out of stock
in the market, rose to a record high of 20.4 percent in January.

The yield on Venezuela’s benchmark 9.25 percent dollar
bonds due in 2027 rose 14 basis points, or 0.14 percentage
point, to 9.57 percent at 2:22 p.m. in Caracas. The price fell
1.07 cent to 97.49 cents on the dollar.

The cutoff point was at an exchange rate of 10.5 bolivars
per dollar with an average bid of 13.1 bolivars per dollar,
according to information obtained by Ecoanalitica’s Oliveros.

“In the end, it’s a knife in the throat for the government
because it ends up creating distortions for fixing of prices for
companies and the calculation of costs,” Oliveros said in a
phone interview from Caracas. “At the end of the day, the
remedy is worse than the illness.”